Activity Based Costing

Course Overview

Activity based costing (ABC) is an accounting technique that identifies and allocate cost to the overhead activities and then those costs are assigned to the products. Activity based costing identifies the correlation among costs, overhead activities and the products and through this relationship an indirect costs is allocated to products less arbitrarily than traditional methods.

Activity Based Costing (ABC) helps organizations to get breakup of organizational costs and to allocate these costs appropriately to different business functions, and activities. This enables public and private organizations to identify with accuracy where the different costs components are being deployed which resultantly helps them develop strategies and plans to optimize costs, improve product and service prices, and identify high cost products, services, suppliers and customers.

This course is aimed at providing practical tools and techniques to help participants manage their costs and successfully implement activity based costing in their organizations.

Course Objectives

  • What is Activity Based Costing and how to implement it in an organization
  • Comprehend and categorize their costs for easy measurement to help in developing Activity Based Costing structures
  • How to use Activity Based Costing structure for managing costs and mapping of costs and activities to achieve cost optimization
  • Use Activity Based Costing to make informed decision making, carry out value chain analysis and create better pricing strategies
  • Case studies of successful implementation of Activity Based Costing in different organizations and what we can learn from them

Course Content

Basics of Activity Based Costing (ABC)
  • What is Activity Based Costing
  • How Activity Based Costing is being used in the industry
  • How can Activity Based Costing address the specific needs and benefits of different industries
  • Which strategic and operational decisions benefit from implementation of Activity Based Costing
  • Role and responsibilities of finance, accounts and other department managers in implementation of Activity Based Costing
Measurement and Development of Cost Models using ABC
  • Identify costs and activities you need to structure
  • Determine which products, services, suppliers and customers to target
  • Develop procedures for calculating and estimating costs
  • Structuring Activity Based Costing to exhibit the effect of varied levels of activity
  • Pros and cons of inclusion of indirect and back office costs
  • How to assign costs to non-value added activities
  • Identify cost variations and the costs allocations
  • Quantify cost drivers of the critical costs
  • Forecast cost projections
Cost Management
  • Categorization of costs with reference to activities
  • How to avoid cost subsidy on discrete activities
  • Carry out value chain analysis of all activities using Activity Based Costing
  • How to control costs using cost management tools and techniques
  • Decision on the pros and cons of make or buy
  • Carry out profitability analysis
  • Develop cost budget using Activity Based Costing
Optimizing use of ABC
  • Streamlining Activity Based Costing to get optimal benefit for the organization
  • Basing your pricing strategy on Activity Based Costing
  • Making Activity Based Costing an integral part of the organization’s financial management information system (FMIS)
  • Carrying out cost reviews
  • Using activity based costing reports effectively
ABC Implementation
  • Different Activity Based Costing tools and techniques and how they impact organizations
  • How to effectively integrate Activity Based Costing into your standard costing and accounting systems
Creating Synergy between ABC and Other Costing Tools and Techniques
  • Use of Activity Based Costing for job and process costing
  • Incorporating cost accounting techniques
  • Linking activity management and continuous improvement to Activity Based Costing
  • Comparison of various costing software

Course Methodology

The training is going to be highly interactive combination of lectures, group discussions, questionnaires, individual reflections, role plays, simulations and videos

Target Audience

All managers and departmental heads who want to identify how activity based costing can be used, professionals involved in managing accounts, personnels that are involved in providing the products and services or those individuals that are providing assistance to the systems or the processes


2 Days (08:30–14:30) with appropriate breaks for tea/refreshments and lunch

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